School District Told to Prepare Now for Tough Biennium

January 7, 2010

The La Crescent-Hokah School District’s books are in order, Darwin Viker said, but the district, like all others around the state, is entering a very difficult three- to five-year stretch when schools shouldn’t expect any new state funding.

Viker, who represents the school’s auditing firm of Larson Allen, gave an overview of the fiscal year 2008-09 audit to the La Crescent-Hokah Board of Education at its Dec. 16 meeting. The fiscal year ended June 30.

Listed in the audit findings provided from Larson Allen, it was noted the school’s assets increased $760,000, or about 13.95 percent, to $6.2 million. That’s a turnaround from last year, when net assets decreased about $250,000.&l t;/p>

"The main reason why we went up, in terms of total assets, it due to liabilities," Viker said. "Short-term borrowing went up and that’s the main reason our assets went up."

That short-term borrowing Viker referred to increased $527,000 over last year to $1.64 million. That’s what increased assets $422,000 to $6.1 million.

Overall revenue was $14,570,920, compared with expenses of $14,913.151. The general fund balance decreased once again by $269,000, mainly because of falling enrollment n pre-k-12 daily membership declined 3.46 percent n and a lack of new state revenue. In addition, the school is fully funding existing programs such as College in the Classroom, where anticipated state aids are less than what was expected.

Viker pointed out the health of food service fund and continued recovery of the community service fund. Food service has a balance of $301,000, an increase of $52,000 over last year. The balance, he said, some would call “surplus.” The increase in large part is due to the delay of capital projects slated for 2008-09.

The community service fund is still a negative $39,000, but it decreased its deficit by more than $23,000 from last year by making $500,000 and spending $477,000. The department has a five-year plan in place to get it back into positive figures.

The school’s 2009 net assets, and particularly the unrestricted assets, which is a long-term look at the district’s financial health, are $921,000, up $432,000 from last year.

The total general fund balance dropped $269,000 to $1.1 million, with $604,000 in the unreserved portion, which is about 4.6 percent of one-year’s expenses. Revenue was almost $80,000 less than planned, while expenses came in $339,000 below budget. Viker advised not spending this fund down any further.

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"As a board, you’ve had a plan in place where you try to maintain a(n unreserved) fund balance of $575,000 … and you’re basically right at that," Viker said. "You’ve heard me and say, ’one month’s worth of operations is a rule of thumb I work with, or about 8 percent.’"

The balance of all funds dropped $244,000 to $1.5 million. Food service and community service funds both increased, but the drop in the general fund, plus a planned decrease in the debt service fund, are what caused the overall decrease.

Viker had a message for school boards in light of the state’s financial struggles, which some state officials think might reach $7 billion in the next biennium.

"I’m just advising people to stay ahead of this," he said. "A new term I’ve started using is, ’Stay on the right side of wrong.’ When you’re estimating revenues, be on the low side, and expenditures, on the high side. If you’re wrong, that’s good news."
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